Policies Promoting Development:
Market Based Policies:
- Role of marlets in promoting Development
Examples: Prompting FDI, Degreulatiion, Privitisation, Trade Liblerilisation,
Smaller States
Taking away role of government - Let markets work on their own.
Benefits (Fre market economics):
1) Morre efficient allocation fo resources
Markey mechanism works on its own - positive outcomes for society -
sustainable growth and development
If goevrbments intervene = gov failure = inefficient outcomes = net welfare
loss.
Governts can be corrupt/ unnecasrry outcomes = hold back development.
2) Invenives from Competition and profit max
Competeition = lower prices as firms are driven to lower costs
Firms driven to produce on AC reduce X-ineffiency.
If profits are made - reinvested - dynamic efficiency - technologiacl
advancements -dvelepment increases.
State run corporations can be inefficient because they lack a profit motive.
3) Encourages FDI
If markets run freely - ecounrurage foreign firms to invest - less red
tape/regulation
(BENEFITS of FDI)
Cons:
1) Infrastructure
Wil there be infrastructure developed to a good enough extent to promote
development
Private escetor firms are less liely to build infrastructure - not considering
full societal impacts.
2) Markets are unlikely to efficiently provide certain goods and serivces
Free markets dont provide public goods - missing market.
Market Based Policies:
- Role of marlets in promoting Development
Examples: Prompting FDI, Degreulatiion, Privitisation, Trade Liblerilisation,
Smaller States
Taking away role of government - Let markets work on their own.
Benefits (Fre market economics):
1) Morre efficient allocation fo resources
Markey mechanism works on its own - positive outcomes for society -
sustainable growth and development
If goevrbments intervene = gov failure = inefficient outcomes = net welfare
loss.
Governts can be corrupt/ unnecasrry outcomes = hold back development.
2) Invenives from Competition and profit max
Competeition = lower prices as firms are driven to lower costs
Firms driven to produce on AC reduce X-ineffiency.
If profits are made - reinvested - dynamic efficiency - technologiacl
advancements -dvelepment increases.
State run corporations can be inefficient because they lack a profit motive.
3) Encourages FDI
If markets run freely - ecounrurage foreign firms to invest - less red
tape/regulation
(BENEFITS of FDI)
Cons:
1) Infrastructure
Wil there be infrastructure developed to a good enough extent to promote
development
Private escetor firms are less liely to build infrastructure - not considering
full societal impacts.
2) Markets are unlikely to efficiently provide certain goods and serivces
Free markets dont provide public goods - missing market.
